Lack of Knowledge Retention: The Hidden Cost of Corporate Downsizing

Study: Despite Correlation with Positive Market Performance, Most Companies Fail to Retain Knowledge When Workers Leave

SEATTLE, WA (Feb. 2, 2009) - While much of the business press is focused on significant reductions in force to improve profitability, there is a hidden cost affecting corporations of all sizes, according to a recent study by the Institute for Corporate Productivity (i4cp). The study found that 30% of responding companies retain knowledge poorly or not at all when workers leave, while half (49%) think they're doing only "okay" at preserving institutional know-how. Just two in 10 think they are doing well or very well in knowledge retention.

This mediocre performance could be costly to corporations at a time when the spotlight on productivity is the brightest. The study shows a significant positive correlation between the extent to which respondents say their organizations retain knowledge and the extent to which they say their firms perform well in the marketplace. What's more, the longer they've had knowledge retention initiatives in place, the more likely they are to say those initiatives are successful. In other words, it seems to take time to get good at knowledge retention.

"This typically isn't something companies figure out overnight," said i4cp CEO Kevin Oakes. "The problem is that a lot of firms don't see it as a burning platform yet, but, by the time they do, it may be too late to salvage. When employees walk out the door - for whatever reason - a tremendous amount of valuable knowledge that will never be retained walks out with them."

Over three-quarters (78%) of respondents said their organizations do not have a specific person or team responsible for knowledge retention (KR) plans, and 68% reported their companies don't have a specific operating budget for KR issues.

Given the lack of resources dedicated to KR, it's not surprising that 61% of respondents said their companies do not have any formal KR initiatives underway. And, even companies that have KR programs admit they don't track them successfully. More than six in 10 (62%) say they don't measure the effectiveness of their KR efforts at all, and 26% do so to only a small extent.

Among the factors cited as hindering effective KR practices, a lack of time headed the list, pointed to by 63% of respondents. Forty-nine percent said their company does not offer enough financial support for KR, and a like number cited lack of management support as a key stumbling block.

"It's a good time to be looking at knowledge retention," said Oakes. "Whether they recognize it or not, companies invest a significant amount of money toward building up and improving the knowledge of their workforce each year. The ‘tacit' knowledge of the workforce - the information in workers' heads - makes up a significant amount of an enterprise's know-how. The cost of losing this can be extreme. What is the cost to a high-technology company if an engineer leaves the organization without providing critical information for a patent filing? Or a consulting company who loses the individual with unique and critical customer information?

"In today's economy, with layoffs and early retirement packages rampant, companies should be focused on programs and systems to help retain that valuable asset in the future," Oakes continued. "Our study suggests that corporate productivity is tightly related to KR, and with our members we are addressing this issue with a unique set of assessments, benchmarks and research."

The Knowledge Retention study was conducted in the fall of 2008 by i4cp, in conjunction with the Center for Effective Organizations and the Human Resource Planning Society. The total number of respondents was 426. The study was undertaken in support of i4cp's Knowledge Retention Accelerator™, a revolutionary program aimed at helping companies improve knowledge retention throughout their organization. Utilizing a unique combination of benchmarking, assessments, applied research and collaboration with experts and peers, the program is designed to help organizations retain their most important asset: the knowledge that resides in the heads of their workforce.

For more information, contact Jay Jamrog at 727-345-2226 (E-mail:

About i4cp, inc.

i4cp is the world's largest vendor-free network of corporations focused on improving workforce productivity. Our vendor-free community facilitates innovation by giving our members - among the largest and most respected organizations in the world - access to:
  1. Peers to spark new ideas and prevent "reinventing the wheel,"
  2. Research to enable members to understand current practices and next practices,
  3. Tools to put ideas and research into action,
  4. Technology to enable members to easily access tailored information and execute workforce strategies.
With more than 40 years of experience and the industry's largest team of human capital analysts, i4cp is the definitive destination for organizations seeking innovative ways to improve workforce productivity. For more information, visit
Erik Samdahl
Erik is the head of marketing at i4cp, and has nearly 20 years in the market research and human capital research industry.